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Questions:


1. In April 2013, the Rana Plaza garment factory collapsed upon its workforce, killing approximately 1,200 workers and injuring about another 2,000. The incident served to highlight the plight of low-paid Bangladeshi workers forced to work in dangerous conditions for the profit of big multinationals and shoppers in first world countries who want $2 shirts.
You are to investigate what happened at Rana Plaza and identify the ethical issues involved. Explain whether these issues are particularly difficult or unique to multinational companies (MNCs).

2. Continuing with the Rana Plaza case, investigate what has happened since for the people of Bangladesh, and whether the MNCs associated with Rana have done more to recognise and act upon their ethical obligations.
You should also look at how social media has placed pressure upon these MNCs through activism and stakeholder pressure. Does social media continue to play a positive role for the workers of Bangladesh, or is it only interested in a quick "Twitter moment"?
 
 

Answers:

Executive Summary

On 23rd April, 2013 the garment factory which was located in an eight storey building collapsed crushing and trapping thousands of workers with it. It left one thousand one hundred thirty four dead and hundreds injured which made Rana Plaza incident as the most deadly disaster in the garment industry. Many survivors claim that they had reported about cracks surfacing in the building a day before the incident but the owners had threatened workers with firing them from their jobs if they do not return to work. In this report we will study about the plight of the low paid Bangladeshi workers and will study about the issues that the MNC’s face. We will study in detail that what actually happened on that day and what all has changed since for the Bangladeshi people.

Introduction

Globalisation and the rapid increase in the investment and trade have heightened the issues related to business ethics. (Fritsch, 2008)Politics, CSR (corporate social responsibility) and corruption are gaining interests of people as they come across with many issues related to them.( Aakhus&Bzdak,2012) MNC’s have always been under scrutiny when incidences about financial crimes and issues related to CSR arise. Many practices are present in our capitalist society that enables these corporations to use schemes like corruption and political pressures to increase their profits.  There is a disparity when it comes to claims that these MNC’s make about ethical conduct and social responsibility as we will see in the case of Rana Plaza Tragedy.

 

1. It was on 24th April, 2013 when the garment factory which was located in an eight storey building collapsed crushing and trapping thousands of workers with it. It left one thousand one hundred thirty four dead and hundreds injured which made Rana Plaza incident as the most deadly disaster in the garment industry. The aftermath of this incident included many stories that focused on the proximate causes of such a disaster. In a report by Rebecca Prentice named “ A year after Rana Plaza, still unearthing its causes” she talks about the reasons that are responsible for this collapse. It was found out that the planning commission has only permitted the builder to build six floors and never eight. Another reason was that the building was build on a site that was a pond in the past and was reclaimed later to build the building. Many survivors claim that they had reported about cracks surfacing in the building a day before the incident but the owners had threatened workers with firing them from their jobs if they do not return to work.

There were concerns regarding the national building codes as it is believed that the builders had political connections that enabled them to have a blind eye for the planning commission. The owner of the building named Mohammad Sohel Rana a businessman who had close ties with the ruling political party was accused of being an unscrupulous businessman. (Aguirre, 2008)He tried fleeing the country after the incident but was later arrested near the Indian border. There are many secondary reasons that are responsible for this collapse as one such reason is the fierce competitive garment industry. There are about 4 million people who work in the garment industry in Bangladesh that makes the country second largest garment exporter. The safety and health standards that are provided in these garments industry are not meeting even the basic standards. The workers that are working in these appalling conditions are victims of human rights violations as they are suffering so that the rich can wear fashionable clothes. Brands like GAP and H&M do not own factories but subcontract their production in low wage countries.( Bache, & Flinders 2004) The high street consumers of these brands never realize that there so called “branded clothing” is being made by people who are working in poor conditions. The expectations regarding quality and cost reduction is causing countries like Bangladesh to ignore even the basic human rights. The pressure that the price reduction and quality is felt by workers as they are subjected to quickened production deadlines and overtime. (Bair, 2005)

Let’s study about what happened at Rana Plaza that fateful day as many workers complained about cracks on 23rd April, 2013. But neither the administration nor the owner Sohel Rana paid heed to their complaints. He even notified the media that the cracks were not serious. Many workers who were scared to return to work were threatened by a “month’s salary cut” threat if they do not return to work on time. Many consider that after the incident Rana was just being used as a scapegoat as there are many behind the front man. It was found out that the industrial police had notified the owners of Rana Plaza to close the building and only open it when they have got permission from the structural engineers. The big question that arises after this disclosure is that even after the warning by the industrial police why the owners of the factory ignored their advice and forced the workers to return to work in such dangerous conditions. For this we need to review the happenings from crack to the collapse. After the workers complained for cracks in the building the industrial police advised and cautioned the owners that the building is not inhabitable and they need to close the factory and have to send the workers back. But this was not done as there are many elusive details in the inner workings of the garment industry and even the global economy that were ignored and were never scrutinized.( Crane, 2008) Some of the reasons and the ethical issues that are responsible for Rana Plaza disaster are:-

 

(i) Political business Nexus:-In Bangladesh like many developing companies there is a ongoing debate about political and business nexus. Christiane Amanpour a CNN reporter had covered a story about this stating that BNP which stands for Bangladesh National Party is a prominent party that has many leaders owning garment businesses. These leaders are strong supporters of BGMEA that is the Bangladesh Garment Manufacturers and Exporters association. After the incidence it was BGMEA that stood in the international media keeping count of how many dead and asking the government to punish those responsible. But things were not as they seem so as it was later found that the posh headquarters of BGMEA were build illegally as well. (Bäckstrand, 2006)Thus we can clearly know that the garment industry is just another political ground for leaders who themselves are breaking every national laws. It was the interview with the Prime minster that shook many Bangladeshis and even created uproar internationally as when she mentioned that “accidents happen” while giving interview for CNN. It was later known that she even denied the owner Rana’s association with her party. But the media exposed that not only he was actively involved in her party but was affiliated to Murad an active member of the ruling party.( Long, 2015) The ethical issue that arises in this disaster is that the politicians resort to trading community and industrialists for funds that is usually a pool of black money. This close nexus places the public policy on a complete blockage. This deteriorates the social attitudes and standards of people involved. According to an article by Rajinder Sachar titled “ Clean politics demands no corporate funding to political parties” he clearly mentions that cynicism of money power playing is now becoming normal for the public to see and experience. These contributions corrupt politics but many MNC’s and organisations are actively involved in funding elections of major parties. This ethical issue is not particularly unique for MNC’s as there are numerous reports where MNC’s are accused of lobbying parties.( Detomasi, 2007) One such example is of Oil MNc’s that contribute to party funds in the major political parties of the west. In the US Exxon Mobil and Chevron Texaco have openly contributed to the campaigns of both Democratic and Republican representatives. Hamilton in the year 2004 stated that these MNC’s are lobbying congress. Thus creating a revolving door between public office and oil. This gives the MNC’s economic, energy security and strategic security not only in their home countries but even abroad. Both the parties mutually support each other in a desire to control, expand and defend their share.

(ii) Illegal building extensions:- the chief engineer Emdadul Islam of the Capital Development Authority informed the media that the owners did not have the consent or permit to build a eight storey building. This identifies a corrupt system that was not being monitored by the Bangladeshi Government. Unfortunately it is not a single case as there are many reports where industrialists and owners of MNC’s have obtained permits and permissions by giving bribes. In this case the Owner Sohel Rana bribed the Savar Mayor to obtain permission. In a contemporary organisational culture many organisations are willing to increase their profits by money laundering, bribery and corruption. The evidence related to many articles and journals related to social responsibility has supported this claim. A paper published by Olatunde Julius Otusanya tiltled “ A critical Examination of the multinational companies Anti-corruption Policy in Nigeria” explains how MNC’s are using the politically elite to seek advantages in their earnings and to gain competitive advantage. They are using bribes along with other inducements to secure contracts from the government. This ethical issue of corruption is not at all unique for MNC’s as many scholars like Olurode in the year 2005 pointed out that this is a recurring misuse of the public office for the financial gains of a private entity. Corruption can exist in any enterprise whether it is small or big.

In case of the Rana Plaza tragedy we came to know that the huge rise in demand in the garment industry has resulted in demands of high rise buildings to be used as factories. Some of these buildings are ordinary residential complexes that are being used as factories. These illegal establishments are not monitored by the government due to reasons like corruption and political-business nexus. The blame goes for the western MNC’s that are benefitted by the cheap labor force in Bangladesh. The failure of the government to protect human rights and workers right all point out that due to corruption the people are being abused by business enterprises. MNC’s are expected to conduct their business in accountability to a wider society but they misuse their power to increase dividends and profits. This is made possible by strategies like bribery, money laundering, financial engineering and other corrupt practices. Bakan in the year 2004 mentioned that no limit whether it be internal (legal, ethical and moral )or external can limit an corporation from making profit. Sikka in the year 2008 supported Bakan bt adding that such practices have now become a part of the “enterprise culture”.

 

2. Around 4000 workers were toiling in the housed building of Rana Plaza producing garments for some of the biggest Canadian, European and American brands. In those workers eighty percent were women aging between 18-20 years. Their shift timings included fifteen hours work ranging from 90-100 hours every week. They were given only two days off a month. It was on the fateful morning of 24th April that many workers refused to enter the building as many cracks have appeared all over the building. But they were made to by threatening of a “month wage cut”. It was at 8:45 when the regular power cut occurred and the generators turned on that the workers heard a loud explosion and the building collapsed. According to a article by Jason Burke a journalist in the guardian the real culprit behind this tragedy is not the government or the owners but it is never ending greed of the corporations to fulfill the need to cheap clothing.( Burk, 2014) The brands for which these workers were manufacturing clothing included the names like Primark and Matalan. As the western countries are getting richer the demand for quality is steadily rising. As they believe that cheap has no longer to be nasty it is the new meaning of affordable.( Galbreath, 2009) It was after 2004 that the Bangladeshi garment industry boomed and the demand from US and Europe are so great that the business keeps on building. (Carroll, 1999)When the industry boomed the land prices in the central part of the city increased many folds which resulted in invested looking out for spaces in the margins of the city. The building were never planned or regulated.

But soon incidences like Spectrum collapse in the year 2005 where sixty four workers died manufacturing clothes for western retailers came into light. This did not stop the western retailers and labels to open new factories all around Dhaka. In the year 2013 Bangladesh was second only after China as the biggest exporter of clothes. Some of the brands that were listed and who acknowledged for getting their recent orders done from the Rana Plaza were Benetton (Italy), Texman (Denmark), Bon Merche (UK), Primark (UK/Ireland), The children’s Place (US), Cato Fashions(US), Mango(Spain), El Corte Ingles (Spain), Kik(Germany), Matalan (UK) and Joe Fresh (Loblaws, Canada). But neither of the brands or MNC’s has acknowledged that it was their unethical behavior and bargaining power that is the prime factor for such a tragedy. In the year 2012 a report published by The New York Times numerous suspected payments were investigated by Wal-mart to the Mexican authorities. In the year 2012 a fire destroyed Tazreen fashions which were producing garments for Wal-mart and Sears in Dhaka. About 112 workers were killed and one fifty others were injured. The working conditions in the factory were inhumane and unsafe. Even after the incidence both Sears and Wal-Mart denied any relationship with Tazreen fashions and were later claimed to terminate their contract with the manufacturer.

But it was reported that after the Rana Plaza collapse on the 29th April major retailers like Wal-Mart, the Gap and H&M met in a meeting in Frankfurt with NGO’s and labor groups to prevent such disasters. The European Union which is the largest trading partner for Bangladesh is considering sanctions. A recent setback to Bangladesh was when Wal-mart announced that it will indeed stop doing business with Bangladesh and transfer its business to other countries. This will soon be followed by other MNC’s as well. Therefore none of the MNC’s that were listed in the reports that were involved with Rana Plaza garment manufacturing has acknowledged their ethical obligations but is looking for other countries to work with. They are opting to look for other options rather than obliging to their ethical obligations to the workers can manufacture their garments. They are looking for desperate workers in other countries that will be willing to risk their lives to work under unsafe and inhumane conditions at low wages. It is quite impossible for them to replace the Bangladeshi garment production thus they are looking for a scenario where they can limit themselves by diversifying sources and still work in Bangladesh.

 

For the people of Bangladesh the scale of the Rana Plaza tragedy was quite unprecedented as many other incidences have occurred were none were on this large scale. It was realized that a more systematic and coordinated approach was needed to ensure the building and fire safety in the garment industry of Bangladesh. As many survivors of the Rana Plaza complained that the numbers of dead are more as the people were not able to escape out of the narrow exit doors at time. In May 2013 in Bangladesh Accord on fire and building safety was published and was later signed by over 150 corporations and MNC’s. Along with the data and safety instruction inspections were made and many renovation plans were published. Rana Plaza Arrangement was made under which the kin of the Rana Plaza victims will receive compensations. It is a coordinated and unprecedented approach in order to ensure that the people who suffered in this tragedy will receive compensation to cover medical and income costs. Under this compensation arrangement only four brands joined the commitment in the year 2014. Many others like Carrefour, Adler, JC penny, Benetton, Lee Cooper, Mango, Walmart, Store 21, Children place, Kids for fashion, Matalan, Yes zee, NKD, Camaieu, Carrona, PVT(texmen) and Cato fashions are refusing to join the compensation arrangement. Therefore if a majority of the labels refuse the payment the forty million needed for the compensation will be short and according to the ILO standards it will not be granted. Out of all the MNC’s one such brand that had played a leading role in the response of this tragedy is Primark as they have paid their 3600 workers stop gap salaries of over nine months. They were also an active partner in establishing the arrangement framework and coordination committee for Rana Plaza. But recently after Un international guidance and ILO guidance it has been seen that Primark is wavering from its promise. Brands like Loblaws, Bonmarche, Primark and El Corte signed the Rana Plaza arrangement and worked with the Union to build the clean clothes campaign. They provided initial humanitarian work and relief after the incidence. Each and every condition and stipulation has been met in the arrangement. Lately Primark is hesitating as they want to commit to their own scheme which is not fair or transparent. It is flawed in many ways and is quite stringent. Many others brand that were not connected to Rana Plaza are being asked to make voluntary donations to the Rana Plaza Donors Trust fund. El Corte and Mascot are the two companies that have contributed to this fund. (Blowfield&Frynas, 2005)

Insufficient compensation and slow progress has hit the relief work that was being done for the victims families as more than a year has passed after the collapse. Enterprises whether they were national or international have failed to abide the international and national laws. The social audits that were conducted by the officials regularly in the building were all a sham as they verified that the building was safe to work. The international brands were created an illusion for the workers so they cannot protest against the working conditions. Many of the brands refused to have knowledge that their products were being made in Rana Plaza thus pointing out the issues in supply chain and traceability. The MNC’s that are related to this tragedy have to respect the human rights as they have to mitigate, identify, prevent and remedy any violations that take part on their part. A major obstacle that is coming in the way of the justice for the victims of Rana Plaza is the lack of robust mechanisms and binding standards for such tragedies. Even after the claim compensation was initiated after a year of the tragedy only half of the MNC’s and labels that were associated with Rana Plaza had contributed to the fund. International NGO’s and unions are continuously pressurizing the labels and multinational brands to donate. In a recent contribution the French Government has asked the French Brands to donate for the fund. Carrefour, the multinational retailer along with FIDH has signed a Fire and building safety agreement.( Greenhouse, 2013) A total of 2800000 $ have been distributed to the victims families in nine stages and according to the Centre for Policy and dialogue each family has already received something between 1300 to 6300 $ as compensation. But many critics accuse that this compensation is “insufficient” based on the fact that they have lost a family member that was earning for the family. Only compensation cannot prevent tragedies like these and some major changes in the working of these factories and even supply chain on these brands are required. It is essential that the workers are allowed to exercise their right to have a union. According to a comment made by Dan Rees of the ILO better work program “if on that fateful day the workers had dared to express their concerns and fears and would have not entered that building even after the threats that tragedy would not have taken place”.

Conclusion

Many things have changed for the better as US has suspended Bangladesh preferred status until they do the pending improvements in the worker rights even in non garment industries. Many organisations for workers are working more freely and continuously scrutinizing the government for their wrongdoings. The government of Bangladesh has increased the minimum wage percentage by seventy seven percent. Many Bangladeshi owners now know that it is a real threat that if they do not improve the workers poor working conditions they may face closing of their industry and factories. Even after so many positive changes the poor safety conditions and working conditions is not a recent issue in the garment and textile sector but the human rights violations need strict international standards to be set for labour rights. Social media did play an important part in shining the light on the issue as now many consumers are aware of the issues of the supply chain of these huge labels.( Fox, 2013) We can be optimistic that the support that the workers got from social media was not a quick Twitter moment as many workers now have access to smart phones through which they share their experience on social networking sites. It is believed that within the next decade people will be able to get information that the clothes that they are buying was made in which factory and in which country.( Wieland &Handfield, 2013) This will prevent unethical suppliers and companies to find nowhere to hide. As the textile and garment industry is going through a massive change which is for the better of the industry.

 

References

Aakhus&Bzdak, M & M , 2012. "Revisiting the Role of “Shared Value” in the Business-Society Relationship.". Business and Professional Ethics Journal , 31 (2), 231.

Aguirre, Daniel. 2008. The Human Right to Development in a Globalized World Ashgate Publishing, Ltd.

Bache, Ian and Matthew Flinders. 2004. Multi-Level Governance, Oxford University Press

Bäckstrand, Karin. 2006. "Multi‐stakeholder Partnerships for Sustainable Development: Rethinking Legitimacy, Accountability and Effectiveness." European Environment 16 (5): 290-306

Bair, Jennifer. 2005. "Global Capitalism and Commodity Chains: Looking Back, Going Forward." Competition & Change 9 (2): 153-180

Blowfield&Frynas, Mi &J G, 2005. "Editorial Setting New Agendas: Critical Perspectives on Corporate Social Responsibility in the Developing World." . International Affairs , 81 (3), 499-513

Burk, J , 2014. Rana Plaza: one year on from the Bangladesh factory disaster. The Guardian, 19 April. 2

Carroll, Archie B. 1999. "Corporate Social Responsibility Evolution of a Definitional Construct." Business & Society 38 (3): 268-295

Crane, Andrew et al. 2008. The Oxford Handbook of Corporate Social Responsibility Oxford Handbooks Online

Detomasi, David Antony. 2007. "The Multinational Corporation and Global Governance: Modelling Global Public Policy Networks." Journal of Business Ethics 71 (3): 321-334

Fritsch, Stefan. 2008. "The UN Global Compact and the Global Governance of Corporate Social Responsibility: Complex Multilateralism for a More Human Globalisation?" Global Society 22 (1): 1-26

Fox, E J, 2013. "Shoppers lash out at stores over Bangladesh". CNN Money., 01 May. 3

Galbreath, Jeremy. 2009. "Building Corporate Social Responsibility into Strategy." European Business Review 21 (2): 109-127

Greenhouse, S, 2013. "Major Retailers Join Bangladesh Safety Plan". The New York Times, 13 May. 3

Long, C, 2015. After Rana Plaza. Jacobin., 19 January. 1

Wieland &Handfield, A and R B. , 2013. The Socially Responsible Supply Chain: An Imperative for Global Corporations. Supply Chain Management Review, 17(5), 210-230.

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